Excerpt: - administrative law - government contract: [vijender jain, c.j., rajive bhalla & sury kant, jj] government contract rejection of highest bid challenge as to held, state has no dominus status to dictate unilateral terms and conditions when it enters into contract. its actions must be reasonable, fair and just in consonance with rule of law. as a necessary corollary thereto, state cannot refuse to confirm highest bid without assigning any valid reason and/or by giving erratic, irrational or irrelevant reasons. the state is free to enter into a contract just like any other individual and the contract shall not change its legal character merely because other party to contract is state. though no citizen possesses a legal right to compel state to enter into a contract, yet latter can..........of warning to the authorities functioning under the indian income-tax act, 1922, that such drastic orders transferring cases from one place to another should not be passed without giving an appropriate opportunity to the assessee of being heard. the learned counsel then refers to the observations of their lordships of the supreme court in pannalal binjrajs case. at page 262-263 his lordship, mr. justice bhagwati, was pleased to observe that :'...... it would be prudent if the principles of natural justice are followed where circumstances permit, before any order of transfer under section 5(7a) of the act is made by the commissioner of income-tax or the central board of revenue as the case may be, and notice is given to the party affected and he is afforded a reasonable opportunity of.....

Judgment:

The facts of this lie within a very narrow compass. It is alleged that the petitioner shifted to Trivandrum from Ahmedabad in the year 1942. From 1942 to 1947, he was doing business in Travancore-Cochin and was being assessed under the Travancore Cochin Income-tax Act. Thereafter, the business of the petitioner was converted into a private limited company. From the year 1950 to 1953, the petitioner was being assessed by the Income-tax officer, Ernakulam, under the Indian Income-tax, 1922. It is alleged that after 1953, the petitioner ceased to carry on any business. The Income-tax Officer that he had no taxable income and was, therefore, forwarding a return showing 'nil' income. He also pointed out that he was a permanent resident of a Trivandrum and, consequently, the Income-tax Officer, Bombay had no jurisdiction to serve any notice on him. The petitioner also filed with the Income-tax Officer, Bombay, an affidavit dated the 28th March, 1960, setting out in detail his activities and the various places to which they were confined. The petitioner further alleged in his petition that since he had no business or income after the assessment year 1953-54, he was not being assessed to tax by either the Income-tax officer, Ernakulam or by any other officer. He was living retired life at his residence in Trivandrum. Nothing happened for quite some time after the petitioner had written his above-mentioned letter dated 17th December, 1957, and filed his affidavit. On 3rd June, 1961, the Income-tax Officer, Section VII (Central) Bombay wrote to the petitioner that the notices under section 23(2) and 22(4) dated the 1st June, 1961, for the assessment year 1957-58 and 1959-60 be treated as cancelled. On 29th June, 1961, the petitioner moved a petition in the Kerala High Court, inter alia, contending that the Income-tax Officer at Bombay had no jurisdiction to assess him. The said petition was dismissed as withdrawn on 6th July, 1962, in view of the fact that the petitioner had been, by then, informed by the Central Board of Revenue by their letter dated the 28th of March, 1962, that the transfer order had been made by them and the notices under section 23(2) and 22(4) as already stated, had been withdrawn by the Income-tax Officer, Bombay.

The orders impugned by the present petition are Order No. 55/56/55-IT dated 10th June, 1955, passed by the Central Board of Revenue transferring the cases of the petitioner from the Income-tax Officer, Salary Circle, Ernakulam, to the 7th Income-tax Officer, A-1 Ward, Bombay, and the Order No. 55/56/55-IT dated 14th February, 1956, passed by the Central Board of Revenue transferring the petitioners cases from the 7th Income-tax Officer, A-1 Ward, Bombay, to the Income-tax Officer, Section VII (Central), Bombay.

Mr. V. A. Sayid Mohammed learned counsel for the petitioner, has raised two contentions before me, viz., (1) that the orders for transfer were made before section 5(7A) of the Indian Income-tax Act, 1922, was amended by the addition of an Explanation in 1956 and, consequently, the amendment does not save the order, and (2) that no opportunity of being heard was given to the petitioner before passing the transfer orders. In support of the first contention the learned counsel submits that it was held by the Supreme Court in Bidi Supply Co. v. Union of India that the omnibus order transferring all the cases was not within the purview of section 5(7A). Submits the learned counsel that in spite of the fact that the section was amended by the addition of the Explanation there is nothing in the Explanation to suggest that the orders which were invalid at the time they were passed stood validated by the amendment. I am afraid I do not agree with the submission of the learned counsel. It is not disputed that in view of the decision of the Supreme Court in Pannalal Binjraj v. Union of India, such an omnibus order could be passed under the amended section 5(7A). It should be remembered that the amendment was retrospective and specially provided that the Explanation shall be deemed always to have been there. In view of this retrospective amendment, I am remitted to consider the validity of the transfer order if section 5(7A), as amended, was there from the very beginning. In this view the contention of the learned counsel for the petitioner must be repelled. Then submits the learned counsel that his Lordship Mr. Justice Bose, in Bidi Supply Companys case sounded a note of warning to the authorities functioning under the Indian Income-tax Act, 1922, that such drastic orders transferring cases from one place to another should not be passed without giving an appropriate opportunity to the assessee of being heard. The learned counsel then refers to the observations of their Lordships of the Supreme Court in Pannalal Binjrajs case. At page 262-263 his Lordship, Mr. Justice Bhagwati, was pleased to observe that :

'...... it would be prudent if the principles of natural justice are followed where circumstances permit, before any order of transfer under section 5(7A) of the Act is made by the Commissioner of Income-tax or the Central Board of Revenue as the case may be, and notice is given to the party affected and he is afforded a reasonable opportunity of representing his views on the questions and the reasons of the order are reduced, however briefly, to writing.'

So far as the observations of Bose J. in Bidi Supply Co.s case are concerned, they were made in a different context. At page 283 his Lordship expressly observed :

'What is the position here There is no hearing, no reasons are recorded; just peremptory orders transferring the case from one place to another without any warning; and the power given by the Act is to transfer from one end of India to the other; not is that power unused. We have before us in this court a case pending in which a transfer has been ordered from Calcutta in West Bengal to Ambala in the Punjab.'

Then at page 287, to which the learned counsel for the petitioner drew my pointed attention his Lordship was pleased to point out that :

'In my opinion, the power of transfer can only be conferred it if is hedged round with reasonable restrictions, the absence or existence of which can in the last instance be determined by the court; and the exercise of the power must be conformity with the rules of natural justice that is to say, the parties affected must be heard when that is reasonable possible, and the reasons for the order must be reduced however briefly to writing so that men may know that the powers conferred on these quasi-judicial bodies are being justify and properly exercised.

In my opinion what is to be deduced from these observations is that, since no hearing was provided in section 5(7A) that rendered the provision violative of article 14 of the Constitution which view was not accepted in Pannalal Biniraj case. Again in Pannalal Binijraj case their Lordships strongly emphasised the advisability of providing the assessee an opportunity of being heard before taking drastic steps of transferring a case from one court to another but their Lordships did not hold that, in the absence of such an opportunity, the orders would stand vitiated. In the Income-tax Act of 1961, provision for being heard has been made in certain cases.

In this view the impugned orders would not stand vitiated by reason of the petitioner not having been given an opportunity of being heard. In the circumstances the petition fails and is dismissed, but there will be no order as to costs.